China Still At Advantage Despite Slowing Growth

Published on Author heardd16

China’s economic growth may be at its lowest in two decades, but China still has a competitive edge that is sure to continue to benefit its economy.  Over the past two decades, China has become the world’s largest manufacturer.  Although labor costs in China are increasing from increasing wages, China is still able to manufacture at extremely low costs.  The ability for China to maintain low production costs is due in large part to technological innovation and automation of various factory processes.  As labor costs increase in China, foreign firms like Samsung, Microsoft and Toyota are outsourcing to Myanmar and the Philippines rather than China.  This is little skin of China’s back however, as China has begun turning to higher-margin industries such as marketing and customer service.

This Economist article notes that China may be the last large developing nation to grab a rung on the ladder to becoming a developed nation.  China has taken advantage of global consumerism very well.  As demand grew in Western nations for goods, China used its massive population to produce and export more goods than any nation in the world.  Now that many jobs are becoming automated due to technological advances, China is moving away from simple mass production.  Other countries, such as India and subsaharan Africa, do have a surplus of cheap labor, but they do not have the market foothold that China has.  Besides, the need for mass cheap labor decreases with increasing automation of jobs.

One Response to China Still At Advantage Despite Slowing Growth

  1. As an economist I do not know what “competitive advantage” means for a country — I only know how to define it at the product level, or sometimes the firm level.

    While some industries certainly have higher labor productivity, many segments of garment, toy and other production remain labor-intensive. Oh, and this argument is not new: Japan was at one time held as the last to successfully “industrialize” then came Korea, now China, and perhaps Vietnam is already well along this well-trod path?